Sen. Elizabeth Warren. (Flickr Photo / Elizabeth Warren)

Nice politics, wrong policies.

That’s the general consensus from Seattle-area venture capitalists in response to Sen. Elizabeth Warren’s big plan to break up Big Tech.

Warren set off a firestorm late last week when she introduced a bold vision that would regulate tech giants including Facebook, Google and Amazon as utilities and roll back some of their biggest acquisitions.

In her proposal, the 2020 Democratic presidential candidate cited statistics showing how Big Tech has negatively impacted startup creation.

“Weak antitrust enforcement has led to a dramatic reduction in competition and innovation in the tech sector,” she wrote. “Venture capitalists are now hesitant to fund new startups to compete with these big tech companies because it’s so easy for the big companies to either snap up growing competitors or drive them out of business.”

Threshold Ventures Partner Bill Bryant (GeekWire Photo / Taylor Soper)

It’s true that companies including Facebook and Google wield extraordinary power in industries such as digital advertising. Warren’s plan is “what Silicon Valley needs,” wrote Ruby on Rails creator David Heinemeier Hansson. The idea “would go some distance towards revitalizing the tech sector, and restoring democratic control over these dangerous monopolists,” The Week noted.

But investors say Warren’s plan would do more harm than good for startups.

Bill Bryant, a longtime partner with recently rebranded Threshold Ventures, said breaking up Big Tech would open up more “white space” for competition, as “no venture capitalist would fund a frontal assault on Google, Amazon or Facebook” in today’s market.

“But I’m not a fan of the proposal to break up, force divestiture or impose incremental taxes on successful tech companies,” Bryant added. “A combination of regulatory enforcement, market forces, creative destruction and rational business decision making will correct the excesses, as they did with Microsoft and IBM.”

Heather Redman. (Flying Fish Photo)

Heather Redman, managing partner at Flying Fish Partners, said the best way to encourage startup activity is by “knocking down barriers to starting companies” such as student debt, immigration, cost of living, and other roadblocks that prevent entrepreneurs from turning ideas into businesses.

“Some of these are Warren-supported proposals and I applaud her for that, but Warren’s breakup ideas make no sense to me,” Redman said. “We have good existing antitrust laws. Add better privacy laws to help with the dominance of some of the ad-supported models (hello Facebook), enforce both and we’re good.”

Speaking on last week’s GeekWire podcast, GeekWire co-founder John Cook noted that most venture capitalists actually prefer having large cash-pooled companies in the market as potential acquirers of innovative startups in their portfolio.

“[Exits] are mostly how you monetize your business as a venture capitalist,” Cook said.

That’s what Balaji Srinivasan, chief technology officer at Coinbase, alluded to in this tweet:

Most agree that increasing competition and allowing incumbents to be disrupted leads to more innovation, as Techdirt editor Mike Masnick explained in this post. “But I also believe that this is rarely done by government intervention, and usually comes from new technologies and new innovations in the marketplace,” Masnick wrote.

Bill McAleer, managing director at Voyager Capital, agreed.

“I think her position is naive, misguided and irrelevant,” McAleer said of Warren’s proposal. “Her concerns don’t seem to be an issue with customers or the industry. Competition and innovation in the industry is driven by technology paradigm shifts and not by regulatory actions.

“She would be better served by looking at issues around privacy and use of consumer data, rather than disrupting the significant economic drivers of the innovation economy.”

Added Matt McIlwain, managing director at Madrona Venture Group: “Many small businesses have highly leveraged cloud computing, third party selling systems, advertising/search ecosystems, social media and so much more. I believe it would be detrimental for startups overall. … It is not government’s job to regulate the innovation economy in a heavy-handed way.”

Antitrust distractions could also cause tech companies to miss the next cycle of industry change, Axios reported Tuesday.

Chris DeVore, managing partner at Founders Co-op and managing director at Techstars Seattle, said Warren’s proposal is “brilliant politics.”

“But I’m not as convinced it’s viable policy legislatively or judicially,” DeVore added.

Ben Thompson of popular Silicon Valley blog Stratechery noted on Tuesday that plan would “invite endless lawsuits and bureaucratic meddling around subjective definitions, and effectively punish consumers for choosing the best option for them.”

John Connors, managing partner at Ignition Partners, said Warren’s idea has no substance and recommended that the senator take a trip abroad.

“What laws have these companies violated? Who gets to decide what too powerful even means?” Connors said. “Sen. Warren should spend a few weeks in Venezuela.”

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